Urgent need to reach agreement on oil

 The International Monetary Fund (IMF) has called on Sudan to take emergency measures to stabilize its economy pointing out that the country’s economy is facing "daunting" challenges".

In a statement it issued on Tuesday, the IMF said initial findings from a recent mission to Sudan found the economic situation in 2012 had not improved from 2011, when growth slowed to 2.7 percent, year-end inflation reached 19 percent and the fiscal deficit was about 4 percent of gross domestic product.

The IMF went on to state that the mission recommends a two-pronged reform strategy: short-term emergency measures to regain control of, and stabilize, the economy, including fiscal consolidation, and in the medium term, a comprehensive structural reform program to recalibrate the economy in line with the country's economic and financial potential.

I wrote in this space last week that it is obvious that the country’s economy is heading for collapse, if no reforms are introduced. I also pointed out that although the government realizes this fact but it also realizes that the reforms needed to avert the collapse are not in their own interest. So the government from time to time circumvents this matter by trying to apply and implement futile and fruitless economic policies, including the economic liberation policy, lifting subsidies on fuel and a managed float of the foreign exchange rate.

In the meantime, earlier this month, a confidential report by the World Bank warned that South Sudan is quickly heading towards an economic cliff in the light of its decision to shut down oil production.

I do believe that the only way for the two countries to achieve proper solutions is to reach a final agreement regarding the oil issue, so that, I hope, they may list this issue at the top of their  agenda at their ongoing negotiations in the Ethiopian capital, Addis Ababa, as the two countries, according to the above technical reports, are now undergoing the most serious inflationary stages of in their economies.

The ruling National Congress Party(NCP) justified the potential suspension of fuel subsidies, claiming that the plan to lift subsidies on fuel as a measure of mitigating the country’s economic crisis, pointing out that subsidized fuel commodities were being smuggled from Sudan into neighboring countries. The NCP’s organizational secretary Hamid Sidiq on Tuesday went to great lengths to say that the price of a fuel gallon in Sudan is 2.5 US dollar while in Ethiopia it is 4 US dollars, Chad 6 US dollars and South Sudan 7 US dollars.

“Sudanese people cannot afford the burden of supporting all the peoples of the continent” he said.

I’m a little confused by the above argument and wondering how it could be a solution! why would the NCP lift subsidies on fuel  instead of addressing the root cause by preventing the traders- who are in fact NCP members!- from smuggling petroleum by-products to the mentioned countries!? Like what the parliament earlier did when it approved a law prohibiting exporting and transporting of goods or commodities to South Sudan and the matter did not stop at this where the Ministry of Justice, warned the citizens from doing so , describing smuggling of goods to the South as a crime on par with supplying the enemy with weapons! The Justice Ministry even went further by saying that it will impose-on smugglers- sentences that end up on death penalty.

Returning to the above specialized reports, which come from internationals specialized bodies, I think they should not be ignored and should be taken into considerations in order to pull these two indebted countries out of their economic crisis.